Markets

September Sell-Off: S&P 500 Craters 78 Points, Approaching Correction Levels as Apple, Oxy, Lead Tech Stocks, Energy Stocks Down

The S&P 500 index (SNPINDEX: ^GSPC) fell sharply on Sept. 23, losing 78 points, or almost 2.4% in a broad sell-off. Of the 505 stocks in the index, 478 finished today's trading session lower than they started, and all 11 sectors fell at least 1% today. 

The energy sector was today's hardest hit, with the Energy Select SPDR ETF (NYSEMKT: XLE) falling 4.2%, followed by the massive tech sector, with the Technology Select Sector SPDR (NYSEMKT: XLK) falling 3.1%. Occidental Petroleum (NYSE: OXY) and Apple (NASDAQ: AAPL) were two of the most notable stocks in those two sectors with big declines, down more than 6% and 4%, respectively. 

Red numbers overlaid on a dollar bill.

Image source: Getty Images.

Energy, tech stock sell-off has S&P in correction territory

The S&P 500 reached a recent and all-time high on Sept. 2, at 3,580.84. After today's close, the index has fallen 9.6%, putting it on the cusp of a 10% decline that would be considered a correction. Tech/telecom and energy stocks have been a big reason why, with these sectors all having lost more than 10% of their value since the market's peak:

XLE Chart

XLE data by YCharts

But the sell-off in these stocks isn't from investors rotating their cash out of tech or energy and into other sectors. Since the early September high, every sector has fallen at least 5%. 

Coronavirus cases, economic and political uncertainty behind investor worries

The September sell-off isn't clearly the result of any one thing, as when stocks crashed earlier this year as coronavirus cases and a near-worldwide lockdown put the global economy in neutral for months. Over the past three weeks, a combination of factors has affected stocks and sectors, including a "healthy" breather for a stock market that had gained more than 60% from the March low to the September high:

SPY Chart

SPY data by YCharts

Tech stocks had done even better, gaining over 80%, while oil stocks, which remain under immense pressure from a global oil crash, had gained almost 50%. In the weeks since, investors have looked up and come to the conclusion that the economic momentum since April is running out of steam. New unemployment claims have remained at levels that would shatter records in any other year, while coronavirus vaccine development remains unlikely to lead to a breakthrough before next year. 

Pfizer (NYSE: PFE), one of the leaders in the race for a vaccine, recently announced it was adding another 14,000 participants in its phase 2/3 trial with a target of having more data in late October. Johnson & Johnson (NYSE: JNJ) only recently moved its vaccine candidate into phase 3 trials, putting it behind the leading candidates. However, J&J is working on a single-shot vaccine, while the other leading candidate vaccines require a follow-up booster shot several weeks later. So while it's later to the party, it should get results more quickly. 

Nonetheless, even the leaders aren't expecting to be able to bring a fully approved vaccine to market quickly. We could see emergency use authorizations later this year for high-risk individuals or specific groups, but a widely available vaccine isn't expected before 2021. 

Add in the uncertainty of a highly divisive political atmosphere that will likely see the rhetoric only increase between now and Nov. 3, and investors have shed stocks in recent weeks. Taking gains from one of the best five-month runs in market history was likely the obvious -- or at least easy -- decision for many investors. 

Amazon: "That's not our Bike," Peloton investors sigh in relief

Yesterday, Amazon (NASDAQ: AMZN) investors got all excited about its prospects to jump into the interactive home exercise market, when word got out that a $500 "Prime Bike" showed up on the company's marketplace, along with a press release from its maker, making it seem it was a product Amazon was closely involved in. Peloton (NASDAQ: PTON) investors freaked out, sending shares of this non-S&P stock down sharply on the news. 

Fast-forward to today, and Amazon is saying "nope" to the Prime Bike, denying any involvement with its manufacturer and asking the maker to clarify the branding before it can return to the Amazon marketplace. Peloton shares closed up modestly today, bucking the market's big sell-off likely on the news Amazon wasn't about to -- yet, anyway -- blow up its business. 

Not all bad news: Twitter, Nike shares up on positive news

Twitter (NYSE: TWTR) shares gained 6.1% today following an upgrade from Pivotal Research analyst Michael Levine. Levine says Twitter stock could reach almost $60, due to a number of factors he thinks will help the company finally improve how much money the popular platform can actually generate as a business. 

Nike (NYSE: NKE) shares gained nearly 9%, tops in the S&P, following its fiscal first-quarter earnings, reported after market close the prior day. The global footwear giant reported total sales came in about flat, much better than expected, considering the global economy was still in a free fall for much of the period, which covered June through August. Earnings per share were up about 10% as Nike cut costs in the quarter, and about twice what analysts expected. Nike's online focus continues to pay off, with digital sales up an incredible 80%, making up for all the physical retail sales lost to coronavirus closures. 

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jason Hall has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Nike, Peloton Interactive, and Twitter. The Motley Fool recommends Johnson & Johnson and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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